How has the landscape of terrorism finance (and its disruption) changed over the past year? What have been the most significant incidents?
Terrorism financing, which had been somewhat contained, burst forth again with ISIS. The organization may have reached $1 billion in revenues in earlier years. They succeeded in co-opting banks and money changers in Syria and Iraq to handle the proceeds of oil sales, antiquities sales, kidnapping, assessed fees for internal transactions, and more. The United States led a significant effort to limit the ability of banks and money changers in the region to continue this practice. As a result, ISIS’s resources, along with its personnel, are diminished.
Where have successes and failures indicated a need to reassess approaches towards illicit financial flows? Is a shift in focus required?
What remains to be grasped is the congruity of mechanisms that support tax evasion and avoidance and therefore equally support corrupt, criminal, and terrorist flows. Western countries are acting under the illusion – or quite knowingly – that we can keep open the doors to tax evasion and avoidance bringing money from other countries that we do want, and at the same time close the doors to other money that we don’t want. This is not possible.
Who are the key players and organizations when it comes to disrupting flows? Should the drive come from policy or industry?
We need to take a lesson from the Panama papers. Governments need to mandate greater transparency in ownership of entities and in movements of funds. Banks need to take a much harder line toward incoming deposits that are not patently clear as to origin and legitimacy. We have to get beyond the notion that money is good until proven bad or that any explanation of the origin of funds is acceptable no matter how far-fetched. We need to be proactive up front in curtailing suspect money.
What are the likely implications of the Trump presidency for illicit financial flows?
We have every reason to fear a weakening of Sarbanes-Oxley, FATCA, the Foreign Corrupt Practices Act, and more. There is some hope that we might see action on identifying the beneficial owners of entities.
What key issues are you most looking forward to seeing discussed at the Chatham House Illicit Financial Flows conference?
I want us to come away with an understanding that we are dealing with a systemic problem, not a law enforcement problem. Law enforcement within a legal system that is riddled with holes will not work. We have been engaged in anti-money laundering efforts for 30 years and yet money laundering is growing. We have been engaged in a spirited fight against drugs for 40 years and yet drug prices have not risen nor drug availability fallen. We are deeply concerned about human trafficking, illegal fishing, decimation of herds of animals, counterfeiting, environmental crimes, and more, and yet we are not succeeding in reducing any of these realities. Success will come only when we take a different approach to the problems – a systemic approach focused on the money.
*Please note that the views expressed above are of the speaker and not of Chatham House.